Why IBM Just Bet $3 Billion Of Its Research Budget On The Death Of Moore's Law

When
IBM announced a $3 billion commitment to even tinier semiconductor chips that no longer depended on silicon on Wednesday, the big news was that IBM’s putting a lot of money into a future for chips where Moore’s Law no longer applies. But on second glance, the move to spend billions on more experimental ideas like silicon photonics and carbon nanotubes shows that IBM’s finally shifting large portions of its research budget into more ambitious and long-term ideas.

Since 1965, chipmakers have operated under Gordon Moore’s observation that they would be able to double the number of transistors in a one-inch diameter area of silicon roughly every two years. Companies like
Intel and IBM have proven Moore correct largely by cramming ever-smaller transistors more densely onto silicon wafers. We currently can make chips with transistor gates just 22 nanometers wide, with 14 nm chips coming soon. (For reference, an average strand of human hair is about 100,000 nm wide.)

IBM’s spending much of its $3 billion to push for 7 nm silicon chips. As research executive John Kelly said in a statement in the company’s release, IBM is no longer doubtful whether 7 nm is possible—the question is how to produce them at acceptable prices.

Much of the money, however, is allocated to post-silicon technologies that are still more commercial pipe dreams, but will be needed to make chips brawny and low-powered enough to handle advanced computing needs. They include quantum computing, neurosynaptic computing that makes the chip channel data more like a human brain, and silicon photonics that transmit pulses of light instead of using physical copper wire. IBM’s also looking to replace the materials used in a chip themselves, testing carbon nanotubes as an alternative to transistors and graphene as a smaller and more efficient replacement for the existing silicon semiconductors.

If that all sounds a bit science fiction-y, that’s because much of it is, like looking at slow trains today and envisioning Elon Musk’s concept for an ultra-high speed Hyperloop.

But the money, $600 million a year for 5 years, is very real. IBM tells Forbes the $3 billion isn’t additional money being added to its R&D spend, an area where analysts have told Forbes they’d like to see more aggressive cash commitments in the future. IBM will still spend about $6 billion a year on R&D, 6% of revenue. Ten percent of that research budget, however, now has to come from somewhere else to fuel these more ambitious chip projects.

IBM didn’t say where the money will come from on Wednesday, but the company is rumored to be close to selling its manufacturing unit that makes all its existing chips to Santa Clara, Calif.-chipmaker GlobalFoundries. Forbes contributor Roger Kay sees that Wednesday’s news as a sign that IBM won’t be getting out of silicon anytime soon even if the sale goes through. With GlobalFoundries reported to be primarily interested in IBM’s engineers from that unit, this news may also be a signal of how IBM plans to shift headcount in its chip business.

IBM isn't going to spend more in total on its research, at least for now. But CEO Ginni Rometty seems intent to spend her money a bit more ambitiously. Making chips doesn’t make IBM money today—but commercializing a post-silicon chip could be worth many billions.

If the alternatives were trying to figure out a costly turnaround of the unit or giving up on chips altogether, reallocating $600 million a year and hiring a different breed of moonshot-minded chip engineer appears to have been a capital commitment that proves easier for management to swallow.

Follow Alex on Forbes and Twitter for more coverage of startups, enterprise software and venture capital.